Yesterday, RUB enjoyed a solid session, yet trading flows remained low, as total USDRUB turnover in the MICEX did not exceed USD 3.0bn. At the end of the day, RUB firmed 1.6% against USD (64.18) and 4.2% vs. EUR (72.84). Meanwhile, the EM FX index closed 0.7% in the black with ZAR, TRY, MXN and BRL up near 0.9-1.0%. RUB well outperformed other commodity-based currencies, as NOK and AUD fell 0.8-0.9%, while NGN ended 0.5% weaker against USD. Crude oil’s recovery provided the necessary positive background for the Russian exchange market, as Brent closed 0.7% in the black at USD 46.5/bbl, yet the nearest futures (CO1) declined 1.0% to USD 48.5/bbl. However, during the day crude traded on a markedly stronger footing: in particular, CO1 crossed USD 50/bbl briefly. In addition, we think export increased hard currency selling ahead of tax payments. The heaviest ones are scheduled for next week, so the offer in the FX spot market could persist. Overall, as we have argued before, RUB has more room to appreciate if the crude oil market has bottomed out, and we think it would continue outperforming EM peers. RUB’s volatility has finally started declining, an encouraging sign, in our view.
Separately, the ECB’s policy meeting was a key event on Thursday. The regulator announced a QE programme of purchases amounting to EUR 60bn per month starting in March and finishing in September 2016. This was slightly more than the EUR 50bn per month that had been highlighted in prior press reports, though the total amount is just above EUR 1tn. The programme is designed to return the inflation rate to 2%. The market reaction saw Eurozone bond yields moving (even) lower and the EURUSD exchange rate dropped below 1.14.